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A good financial wellness program takes into account that people are different, not just where they are financially or based on their personal households but also in how much they want to understand and engage with their finances. For example, a lot of people don’t care what’s in their 401(k) — they just want to know it will last them through retirement.
Our goal is actually not to make people financially literate. The time, cost, and effort to build financial literacy is high. We need to help people take actions to secure their financial position. Therefore, our goal is to help them make better choices about their finances. We are focused on this difference between education and action. You can tell people anything you want about how to make sound financial decisions, and they may nod their heads and they may understand, but until they actually take an action that changes their situation, their financial situation is exactly the same.
The right question to ask when creating a financial wellness program is: How can we help drive people to the right actions?
When it comes to the level of involvement people want to have in their own financial lives, they tend to fall into three categories: do it for me, help me do it, and do it myself. The “do it for me” crowd wants to have 401(k) investments managed entirely, wants to have contributions automatically deducted, and takes recommendations without having to spend time researching.
In some cases, the “do it for me” people may not even realize that you are doing something for them! The second group wants some control in their decisions but needs advice and a guiding hand. The last category, the “do-it-myself” group, is likely to do a lot of research and spend time managing investments but, on the other hand, may make mistakes that have serious consequences.
It’s also important to note that people can make irrational, emotional decisions, and we need to steer them toward more logical choices that will work out better in the long run. Financial wellness is not just about putting money in your bank account and your retirement plan — it’s also about how you interact with your health plans. People tend to make emotional instead of rational decisions when they involve the well-being of their loved ones. And these decisions can be very expensive.
For example, people with children tend to load up on dependent life insurance (which essentially provides enough insurance to pay for the funeral expenses of their children), in part because it is inexpensive. These same people, however, often don’t buy enough supplemental life insurance on their own life, even though the financial risk is much greater if they died than if a child died.
Part of our job is to help people understand what these coverages are really for and how they should be using them to be prepared for those “what if” situations.
Many people don’t understand the powerful tax incentives of saving, versus spending, amounts that are deposited into health savings accounts.
Read the rest of this series:
Learn more about financial wellness. Read our Q&A series with Derek Cushman US Financial Wellness Solutions Leader:
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